Selecting Group Healthcare Plans

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Selecting Group Healthcare Plans

• Presented by
• (Name, CPA)
• Member, The Ohio Society of CPAs

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Healthcare Trends

• Employer-sponsored health insurance premiums have
  increased 119 in past 10 years (source The
  Henry J. Kaiser Family Foundation.  Employee
  Health Benefits 2008 Annual Survey.  September
  2008)

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Healthcare Trends

• Without health care reform, small businesses will
  pay nearly 2.4 trillion dollars over the next 10
  years in health care costs for workers
• (The Economic Impact of Healthcare Reform on
  Small Business, Small Business Majority, June
  2009)

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Benefits of offering health insurance

• Helps recruit and retain the best available
  talent
• Employee morale health insurance considered a
  valuable benefit
• If you cant contribute to the cost, employees
  may get lower rates through a group-sponsored
  plan than they could purchase on their own

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Benefits of offering health insurance

• Tax incentives for both employers and employees
• Wellness programs in some plans may help
  employees live healthier and reduce time off

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Types of Group Plans

• Small businesses can choose from different
  insurance plan types. Weigh the pros/cons of each
  against the needs of your group
• Traditional fee-for-service or indemnity plans
• Health Maintenance Organizations (HMOs)
• Preferred Provider Organizations (PPOs)
• Major Medical Policies
• FSAs/MSAs/HSAs

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Fee for Service Plans

• Participants can choose their own providers
• Pay out of pocket for service until annual
  deductibles are met remaining cost shared by
  plan and participant (ex. 70 plan/30 plan
  member)

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Fee for Service Plans

• Least popular and most expensive plan type
• Few cost-containment or managed care measures
  built into the plan
• Favored by employees with serious or chronic
  illnesses

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Health Maintenance Organizations

• Advantages lower cost, broad coverage, but less
  freedom in choice of providers
• Plan members must see a primary care physician
  for all but emergency needs
• Office co-pays average 10 no deductibles

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Health Maintenance Organizations

• Referrals required to see specialists
• Preferred by those with large families who need
  to keep costs down or by younger employees
  desiring the lower premium

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Preferred Provider Organizations

• PPOs blend of fee-for-service and HMOs
• Gives employees more control over their
  healthcare than with HMOs
• Choice of providers referrals not needed for
  specialists

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Preferred Provider Organizations

• Insurer negotiates cost efficient rates with
  in-network providers
• Participants can access out-of-network providers
  but at a higher cost
• Preferred by employees who typically exceed their
  deductibles and want flexibility in choosing
  providers

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Major Medical Plans

• Special fee-for-service plans
• Insurance against risk of long-term chronic
  illness or catastrophic injury
• Limited covered services private nursing care,
  home, office or hospital care x-ray, lab tests,
  prescriptions
• Two types comprehensive and supplemental

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Major Medical Plans

• High deductibles and co-payments, but could
  provide first-dollar coverage with no deductible
  for some services
• Helps employees contain healthcare costs
• Preferred by healthy, low-wage employees

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Flexible, Health and Medical Savings and Spending
Accounts

• All carry tax incentives for employees
• FSAsalso known as known as Cafeteria or 125
  benefit plans
• Employees can put aside pre-tax money to pay for
  out-of-pocket expenses not covered by primary
  insurance plan

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Flexible, Health and Medical Savings and Spending
Accounts

• Reduces taxable income
• Drawback-use it or lose it within one year
• MSAs open only to self-employed or businesses
  with lt50 employees

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Flexible, Health and Medical Savings and Spending
Accounts

• Used with a high-deductible health insurance plan
  (min. 2,000 individual 4,000 family)
• Employees and/or employers make tax-free
  contributions up to 65 of annual deductible for
  individuals (75 for families)

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MSAs

• Withdrawals pay for out-of-pocket expenses
• Account can accumulate from year to year
• Employer contributions must be reported on the
  employee's W-2.
• Earnings of the fund are not included in taxable
  income for the current year

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Health Savings Accounts

• Tax advantaged accounts created to pay for
  qualified medical expenses in conjunction with
  high deductable health plans
• Help consumers prepare for future health events
  including long-term care premiums, because their
  health savings can be rolled over from year to
  year

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Health Savings Accounts

• Are portable from job to job as well as
  retirement
• The money belongs to the individual and can be
  invested, with earnings growing on a tax-free
  basis

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Health Savings Accounts

• How do they work?
• HSA plans include two major components
• Portable savings accounts
• High deductable medical coverage that typically
  includes 100 payment for covered preventative
  care

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Health Savings Accounts

• How do they work?
• They encourage members to become involved in
  their own healthcare decisions
• They help consumers be better prepared for
  medical expenses later in life

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Health Savings Accounts

• Consider contributing a portion of the deductible
  into each employees HSA account (50 or more) to
  help with high deductible
• Another option is to give each employee a monthly
  fixed allowance for insurance premiums and HSAs
  (defined contribution)

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Supplemental insurance options

• Dental care insurance
• Vision care plans
• Big profit center for insurers
• Often not worth the price of premiums
• Limited provider networks
• Better option may be using flexible spending
  account to pay for services

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Factors to consider for your plan

• What services will you cover? Some states have
  laws and regulations for group plans and small
  businesses
• Which employees will the plan cover?
• Full or part timers
• Spouses and dependents
• Unmarried domestic partners

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Factors to consider for your plan

• Will there be a waiting period and eligibility
  requirements for new employees?
• How will health plan portability requirements
  affect your company?

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Researching a Plan

• Sources include
• Talk to other small business owners about their
  plans and experience with insurance providers
• Research providers online
• Consult an independent insurance agent

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Researching a Plan

• Sources include
• Hire a consultant or independent insurance
  brokerage specializing in healthcare plans
• Explore group purchasing options available
  through many professional associations or
  purchasing alliances in some communities

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Helpful Information for Research

• Gather information on eligible employees and
  their dependents before approaching an insurer or
  broker for quotes. This will determine your risk
  pool and plan rates.

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Helpful Information for Research

• Full names of employees and dependents
• Ages, dates of birth, gender
• Social security numbers
• Home addresses or zip codes
• Marital status
• Obtain written confirmation that information is
  used only for underwriting purposes, and
  employees will not be solicited in any way

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Choosing a Plan

•  Evaluate plan types
• Solicit, review and compare proposals
• Negotiate terms and price of the policy

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Comparing Proposals

• Proposals should include the following critical
  components for comparison
• Premium schedule showing the cost per employer
  per month
• Benefits schedulewhat the plan will cover
• List of providers in the managed care network

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Comparing Proposals

• critical components (continued)
• Itemized cost structurethe formula for how the
  insurer arrived at the cost quote for your group
• Copy of the policythe contract listing the
  coverage levels and limitations

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Rates

• Insurers calculate rates based on the specific
  demographics of your group
• Rates are often regulated by states
• Your rates may be affected by the overall health
  of your group. Insurers may charge higher rates
  for groups with a higher claims liability

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Negotiating Rates

• Review cost of coverage for specific services
  (e.g. raising co-payments could lower premiums)
• Consider extending the term of the contract.
  Insurers may give you a price break to keep your
  business for more than one year
• Extend waiting periods for new employees from 30
  to 60 days
• Eliminate obscure services

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Administration

• Employers typically handle the following
  components plan administration functions
• Enrolling new participants and managing changes
  throughout the year (terminations, COBRA
  participants, etc.)
• Deducting premiums from employees pay
• Liaison between employees and insurer

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Administration

• Employers typically handle (continued)
• Reporting and disclosure under the Employee
  Retirement Income Security Act
• More companies are outsourcing components that
  are not part of their core business

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Questions? Comments?
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Thank You

• If you have any questions or would like to
  discuss group healthcare plans or other financial
  matters, please contact me
• Name, CPA
• Company
• Address
• E-mail
• Phone